Answer: A Diff: 1 Type: MC Page Ref: 38 Objective: 2 18 As the level of activity increases within the relevant range, A total fixed costs increases.. Answer: B Diff: 1 Type: MC Page Ref:
Trang 1Management Accounting, Cdn 6e (Horngren/Sundem/Stratton/Beaulieu)
Chapter 2 Cost Behaviour and Cost-Volume Relationships
1) The way in which the activities of an organization affect its costs is called cost behaviour
Trang 29) An increase in sales price would cause a decrease in the break-even point
Diff: 1 Type: TF Page Ref: 7
12) When changes occur in the sales mix, there is no effect on the cost-volume-profit relationships Answer: FALSE
Diff: 1 Type: TF Page Ref: 7
13) A change in the tax rate will not affect the break-even point
Trang 317) As the level of activity increases within the relevant range,
A) total fixed costs remain unchanged
B) fixed costs per unit increases
C) total variable costs remain unchanged
D) variable costs per unit decreases
Answer: A
Diff: 1 Type: MC Page Ref: 38
Objective: 2
18) As the level of activity increases within the relevant range,
A) total fixed costs increases
B) fixed costs per unit decreases
C) total variable costs remain unchanged
D) variable costs per unit decreases
Answer: B
Diff: 1 Type: MC Page Ref: 38
Objective: 2
19) As the level of activity decreases within the relevant range,
A) total fixed costs increases
B) fixed costs per unit decreases
C) total variable costs decreases
D) variable costs per unit decreases
C) variable costs per unit are decreasing
D) variable costs per unit are increasing
Answer: B
Diff: 1 Type: MC Page Ref: 38
Objective: 2
Trang 422) As production increases within the relevant range, fixed costs per unit A) decrease
B) increase
C) stay the same
D) cannot be determined with the information given
Answer: A
Diff: 1 Type: MC Page Ref: 38
Objective: 2
23) In defining a cost as fixed, the accountant must consider
A) the variable costs
B) the contribution margin
C) the relevant range
D) projected sales revenue
Answer: C
Diff: 1 Type: MC Page Ref: 38
Objective: 2
24) The margin of safety
A) equals break-even unit sales less actual unit sales
B) shows how far sales can fall below the planned level before losses occur C) is the sales price minus all the variable expenses
D) is the same as break-even point
Answer: B
Diff: 1 Type: MC Page Ref: 42
Objective: 3
25) Contribution margin
A) is not the same as marginal income
B) can be calculated as a ratio or per unit
C) equals the sales price minus all the fixed expenses
D) equals total fixed costs minus total variable costs
C) total contribution margin decreases
D) total contribution margin increases
Answer: D
Diff: 1 Type: MC Page Ref: 46
Objective: 5
Trang 527) If the sales price per unit is $10.00, the unit contribution margin is $4.00, and total fixed costs are
$20,000, the break-even point in units is
Trang 6Reese, Inc produces pliers Each pair of pliers sells for $8.00 Variable costs per unit total $5.60 of which
$2.50 is for direct materials and $2.10 is for direct labour
31) If total fixed costs are $174,000, then the break-even point in units is
34) If total fixed costs are $62,000, contribution margin per unit is $5.00, and targeted after-tax net income
is $12,000 with a 40 percent tax rate, how many units must be sold to break even?
35) If targeted after-tax net income is $27,000 with a 40 percent tax rate, contribution margin per unit is
$0.80, and total fixed costs are $148,000, how many units must be sold to break even?
Trang 7Hampton Company, a producer of computer disks, has the following information: Income tax rate 40 percent
Selling price per unit $1.00
Variable cost per unit $0.60
Total fixed costs $36,000.00
36) What is the contribution margin per unit?
Trang 837) What is the contribution-margin ratio?
41) The cost-volume-profit graph does NOT show
A) the break-even point
B) the profit or loss at any rate of activity
C) the fixed cost per unit
D) sales volume
Answer: C
Diff: 2 Type: MC Page Ref: 46
Objective: 5
Trang 942) Which of the following is NOT an underlying assumption of the cost-volume-profit graph?
A) Expenses are categorized into variable and fixed
B) Sales mix will not be constant
C) Revenues and expenses are linear over the relevant range
D) Efficiency and productivity will be unchanged
The following information is for Lyceum, Ltd.:
Total fixed costs $142,500
Variable costs (per unit) $45
Selling price (per unit) $70
44) If management has a targeted net income of $21,000 (ignore income taxes), then the number of units which must be sold is
Trang 1046) The contribution-margin ratio is
Assume the following cost information for Quayle Corporation:
Total fixed costs $50,000
Selling price per unit $90
Variable costs per unit $50
48) What volume of sales dollars is required to earn an after-tax net income of $15,000?
Trang 1150) What is the break-even point in units?
52) The change in total results under a new condition, in comparison with some given or known
condition, is the definition of
53) Given a break-even point of 44,000 units and a contribution margin per unit of $4.80, the total number
of units that must be sold to reach a net profit of $9,048 is
54) As sales exceed the break-even point, a high contribution-margin percentage
A) decreases profits faster than does a small contribution-margin percentage
B) decreases profits at the same rate as a small contribution-margin percentage
C) increases profits at the same rate as a small contribution-margin percentage
D) increases profits faster than does a small contribution-margin percentage
Answer: D
Diff: 2 Type: MC Page Ref: 42
Objective: 3
Trang 1255) Operating leverage is
A) the ratio of net income to sales
B) the ability of a firm to pay off its debts
C) the ratio of fixed costs to variable costs
D) also referred to as working capital
Answer: C
Diff: 1 Type: MC Page Ref: 53
Objective: 8
56) In a highly leveraged company,
A) fixed costs are low and variable costs are high
B) large changes in sales volume result in small changes in net income
C) there is a higher possibility of net income or net loss and therefore more risk than a low leveraged firm
D) a variation in sales leads to only a small variability in net income
Diff: 2 Type: MC Page Ref: 49
58) If the contribution-margin ratio is 30, targeted net income is $64,000, and targeted sales volume in dollars is $400,000, then total fixed costs are
Trang 1360) The variable-cost ratio is
A) all variable costs divided by fixed costs
B) net income divided by all variable costs
C) fixed costs divided by all variable costs
D) all variable costs divided by sales
Answer: D
Diff: 1 Type: MC Page Ref: 38
Objective: 2
61) Gross margin is
A) the excess of gross profit over operating expenses
B) the excess of sales over the cost of goods sold
C) also referred to as net profit
D) the same as contribution margin
63) If the proportions in a sales mix change, the
A) contribution margin per unit increases
B) break-even point will remain the same
C) cost-volume-profit relationship also changes
D) net income will not be altered
A) 9,600 units of X and 3,200 units of Y
B) 2,400 units of X and 800 units of Y
C) 3,200 units of X and 9,600 units of Y
D) 1,867 units of X and 622 units of Y
Answer: A
Diff: 2 Type: MC Page Ref: 52
Objective: 7
Trang 1465) If total fixed costs are $62,000, contribution margin per unit is $5.00, and targeted after-tax net income
is $12,000 with a 40 percent tax rate, then the number of units that must be sold is
66) If targeted after-tax net income is $27,000 with a 40 percent tax rate, contribution margin per unit is
$0.80, and total fixed costs are $148,000, then the number of units that must be sold is
Hampton Company, a producer of computer disks, has the following information:
Income tax rate 40 percent
Selling price per unit $1.00
Variable cost per unit $0.60
Total fixed costs $36,000.00
68) How many units must be sold to obtain a targeted income before taxes of $6,000?
Trang 1569) How many units must be sold to obtain a targeted after-tax income of $6,000? A) 115,000
Income tax rate 40 percent
Selling price per unit $2.00
Variable cost per unit $1.20
Total fixed costs $72,000.00
What sales volume in dollars is needed to obtain a targeted after-tax income of $12,000? A) $84,000
71) The contribution margin ratio equals
A) revenue minus variable costs
B) variable costs divided by revenue
C) contribution margin divided by revenue
D) variable costs divided by contribution margin
Answer: C
Diff: 1 Type: MC Page Ref: 46
Objective: 5
Trang 1672) The limiting assumptions of CVP analysis include all of the following EXCEPT
A) a nonlinear revenue function and a nonlinear cost function
B) that the inventory levels at the beginning of the period are close to the inventory levels at the end of a period
C) selling prices and costs are known with certainty
D) costs can be separated into fixed and variable components
Answer: A
Diff: 1 Type: MC Page Ref: 46
Objective: 5
Use the following information to answer the next question(s)
Selling price per unit $ 100
Variable manufacturing costs per unit $ 20
Fixed manufacturing costs per unit $ 30
Variable selling costs per unit $ 25
Fixed selling costs per unit $ 10
Expected production and sales (in units) 1,000
73) Contribution margin per unit is
Trang 1776) If the firm wants to earn $70,000 in before-tax profit, sales revenue must equal
79) The manner in which the activities of an organization affect its costs
Answer: Cost behaviour
Diff: 1 Type: SA Page Ref: 37
Objective: 1
80) Activities that affect costs
Answer: Cost drivers
Diff: 1 Type: SA Page Ref: 37
Objective: 1
81) A cost that changes in direct proportion to changes in the cost driver
Answer: Variable cost
Diff: 1 Type: SA Page Ref: 37
Objective: 1
82) A cost that is not immediately affected by changes in the cost driver
Answer: Fixed cost
Diff: 2 Type: SA Page Ref: 37
Objective: 1
Trang 1883) The boundaries of cost driver activity within which a specific relationship between costs and the cost driver is valid
Answer: Relevant range
Diff: 1 Type: SA Page Ref: 38
Objective: 2
84) The study of the effects of output volume on revenue, expenses, and net income
Answer: Cost-volume-profit analysis
Diff: 1 Type: SA Page Ref: 46
Objective: 3
85) The level of sales at which revenue equals expenses, and net income is zero
Answer: Break-even point
Diff: 1 Type: SA Page Ref: 42
Objective: 3
86) The sales price minus all the variable expenses per unit
Answer: Contribution margin
Diff: 1 Type: SA Page Ref: 42
Objective: 3
87) A firm's ratio of fixed and variable costs
Answer: Operating leverage
Diff: 1 Type: SA Page Ref: 42
Objective: 3
88) The relative proportions of quantities of products that comprise total sales
Answer: Sales mix
Diff: 1 Type: SA Page Ref: 59
Objective: 7
89) The Alexander Company produces one type of machine The following information is available for your review:
Selling price per unit $4,800
Variable costs per unit $3,600
Total fixed costs $108,000
Required:
a Compute break-even point in units
b Compute break-even volume in dollars
c Compute the margin of safety assuming planned unit sales of 120
Answer:
a $108,000/($4,800 - $3,600) = 90 units
b 90 units × $4,800/unit = $432,000
c 120 units - 90 units = 30 units
Diff: 3 Type: ES Page Ref: 42
Objective: 3
Trang 1990) Given the following information for Baugh Company:
Total fixed costs $78,000
Unit variable costs $24
Unit selling price $36
Required:
a Compute the contribution margin per unit
b Compute the contribution-margin ratio
c Compute the break-even point in units
d Compute the break-even volume in dollars
Variable costs per unit $8
Selling price per unit $13
Required:
a Compute the contribution margin per unit
b Compute the break-even point in units
c Compute the break-even volume in dollars
Trang 2092) Wallace, Inc produces squirt guns and has provided the following information: Total fixed costs $100,000
Unit variable costs $10
Planned unit sales 30,000
The break-even point is 25,000 units
Required:
a Compute the selling price per unit
b Compute the contribution-margin ratio
c Compute the break-even volume in dollars
d Compute the margin of safety
Trang 2193) Dopler Inc manufactures a product that sells for $50 The variable costs per unit are:
Variable manufacturing overhead 4
Budgeted fixed manufacturing overhead is estimated at $500,000 and budgeted fixed selling, general and administrative costs are expected to be $300,000 Variable selling costs are $6 per unit
a Determine the break-even point in units
b Determine the number of units that must be sold to earn $100,000 in profit before taxes
c What dollar amount of sales must be attained in order to earn $300,000 in profit before taxes?
d If there is a 40 percent tax rate, determine the sales level in dollars that must be attained in order to generate an after-tax profit of $300,000
Answer:
a Breakeven in Units = Fixed Costs/Contribution Margin Per Unit
= $800,000*/$20.00**
= 40,000 units
*Total fixed costs:
Budgeted fixed manufacturing overhead $500,000
Budgeted fixed selling, general & administrative 300,000
**Contribution margin per unit:
Selling price per unit $50.00
Variable costs per unit:
Direct materials $15.00
Variable manufacturing overhead 4.00
Variable selling costs 6.00 30.00
Contribution margin per unit $20.00
b Unit sales necessary to earn $100,000 in before-tax profit:
Units = (Fixed Costs + Desired Profit)/Contribution Margin Per Unit
= ($800,000 + $100,000)/$20.00 = 45,000 units
c Sales dollars necessary to earn before-tax profit of $300,000:
Sales Dollars = (Fixed Costs + Desired Profit)/Contribution Margin Percentage
= ($800,000 + $300,000)/40%* = $2,750,000
*Contribution margin percentage = $20.00/$50.00 = 40%
d Sales dollars necessary to earn an after-tax profit of $300,000:
Sales Dollars = Fixed Costs + [After-Tax Profit/(1 - Tax Rate)]/Contribution
Trang 2394) The Isbit Company has developed the following income statement using a contribution margin format
ISBIT COMPANY PROJECTED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2006
Variable Costs:
Variable manufacturing costs $60,000
Variable selling costs 20,000 80,000
Fixed Costs:
Fixed manufacturing costs $80,000
Fixed selling, general and
administrative costs 25,000 105,000
The projected income statement was based upon sales of 10,000 units Anton has the capacity to produce 15,000 units during the year
a Determine the break-even point in units
b Calculate the margin of safety in dollars
c The sales manager believes the company could increase sales by 1,000 units if advertising expenditures are increased by $16,000 Should the company increase advertising expenditures?
d What is the maximum amount the company could pay for advertising if the advertising would
increase sales by 1,000 units?
e Management believes that by lowering the selling price to $17 per unit, the company can increase sales
by 2,000 units Based upon these estimates, would it be profitable for the company to lower its selling price?
Answer:
a Breakeven in Units = Fixed Costs/Contribution Margin Per Unit
= $105,000/$12* = 8,750 units
*Contribution margin per unit:
Selling price per unit ($200,000/10,000) $20
Variable cost per unit:
Variable manufacturing costs ($60,000/10,000) $6
Variable selling costs ($20,000/10,000) 2 8
Contribution margin per unit $12